7 Life Lessons From The Very Wealthy

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If you want to become wealthy one day, what is your best option for getting there? Some might say to play the lottery. While this could provide you with wealth if you hit the jackpot, the odds of actually hitting the jackpot are slim. And let’s not even get started with the fact that you will most likely end up penniless quickly in a few years.

If you really want to become wealthy, you need to learn from these people and do what they do. Makes sense right? They know “the secret” of managing their money so the tips and suggestions they offer are ones you should listen to.

It’s the same idea with most anything in life. If you want tips on how to get ahead at work, you seek out someone in the position you want to see what you need to do to get there. Or if you want to run a 5K, you seek the advice of someone that runs 5K races. And when buying a car, you seek the advice of a friend that knows about cars.

So it shouldn’t be a shock that learning money management from those that are wealthy is what you should do. The problem is finding these wealthy people to talk to. Luckily, you don’t have to look very hard. In this post, I am going to share with you 7 tips from the wealthy so that you too can build your wealth and become financially free. Let’s get started.

Defining The Wealthy

Watch television or the movies or read magazines and you would think that the rich spend their money on high end cars, giant houses, lots of jewelry and the finest clothing money can buy. Buy you would be wrong.

The majority of the wealthy don’t live this way. Yes those people you see on TV and in magazines are wealthy, but they are uber-wealthy. They started their own businesses and grew them into dominant corporations. They can easily buy a giant house and a boat and not have to worry much about money.

The wealthy that I am talking about and the ones you should be striving to mimic are the hidden wealthy. These are the rich people that you wouldn’t even know are rich.

Some of you might stop reading here. Being a secret rich person doesn’t sound like much fun. You probably want to flaunt your wealth, right? Actually you don’t. If everyone knows you are rich, you will get hounded by long lost family members looking for some financial help. You’ll get phone calls and junk mail nonstop to support various causes. The real fun is being secret rich.

When you are secret rich, you can go to a WalMart during the holidays and pay off all of the outstanding balances on the layaway gifts. You can take your friends out for fancy dinners and pay for it without worry over the bill. You can also leave large tips for unassuming wait staff members that really impress you with their service. When you stop and think about it, being secret rich is a lot of fun.

So how do you get to the place of being secret rich?

The Secret Rich Formula

When it comes to getting to a status of wealth and becoming part of the secret rich, many people don’t know where to start. Others that have started began by cutting their expenses. This is a good start, but isn’t the complete formula for wealth. Here is the wealth formula:

Reduced Spending + Higher Earnings = Wealth

As you can see, while cutting spending is great (and a requirement) it is not THE way to becoming wealthy. I say this because cutting your spending is finite, in other words, you can only cut so much. You can cut out the expense of cable and the expense of gas if you can walk or ride a bike everywhere, but you still need to eat. You still need shelter, you still need running water.

Once you get to this point, you are done cutting your expenses. If all of that cutting doesn’t result in a ton of savings, then you are going to have a hard time becoming wealthy.

In fact, many people won’t even get to this point. This is because they will find that their quality of life suffers too much.

Cutting your spending is like a rubber band. When you stretch out a rubber band, it either snaps back or it breaks. This is what happens to many people. They either cut back so much they hate life (rubber band breaks) and they give up and go back to their old way of living. Or they get to that point and go on a spending spree to make themselves feel better (rubber band snapping back). You have to find just the right amount of cutting back that you can sustain over the long-term and still be happy.

Adding In Higher Earnings

The second part of the wealth equation is where most people don’t focus their attention. This is a shame since technically, your earnings are infinite. You can get raises at your current job, move to a different employer for a higher salary, work another job, start your own side business, have rental income or investment income, etc. The list for growing your income is virtually endless.

Again though, if you go too far with this part of the equation, the rubber band is going to snap back or break, just like it did with your spending. The result again is to find the happy medium. Increase your income enough that you still have your freedom but you are making progress on your goal of becoming wealthy.

Combining The Two

When you combine reduced spending and a higher income, your result will be wealth. For example, if you were only to reduce your spending, you might be able to save $250 per month. In one year that comes to $3,000. Not bad. In 20 years, you have an extra $60,000.

But let’s say you worked on increasing your earnings. You earned a promotion at work that pays you an extra $1250 per month. That is $15,000 per year. If you take that $15,000 and the $3,000 from savings and invest that money at 8% for 25 years, you are looking at just shy of $1.5 million dollars.

This won’t allow you to buy a yacht, but you would be wealthy and could splurge without a ton of worry.

Real Life Lessons From The Wealthy

Now we get to the part where the wealthy tell you how to become wealthy as well. While the equation I provided is a god starting point, I also wanted to give you tips from the wealthy and action steps for you to follow. The Washington Post produced a piece titled 7 Life Lessons From the Very Wealthy. Here is the list:

1. Having money is better than not having money.
2. Don’t become “cash rich” and “time poor.”
3. Memories are better than material objects.
4. Watch your “lifestyle leverage”, especially early in your career.
5. Having goals is incredibly important.
6. You must live in the here and now.
7. It helps to be incredibly lucky.

Action Steps on Life Lessons From The Very Wealthy

1. Having Money is Better Than Not Having Money

The point here is that money provides you with freedom. And I completely agree. When you have money, you have the freedom to live the life you want and not have to worry when something bad happens and whether or not you can afford a vacation.

2. Don’t Become “Cash Rich” and “Time Poor”

While we all strive to have enough money so that we can do what we please with our lives, don’t sacrifice your time trying to achieve it. If you spend all day at work and only see your children to tuck them in at night, you may want to re-assess your priorities. In other words, don’t make money your idol. See it as a tool for getting you to where you want to be.

Actions Step:Learn what opportunity cost is and weigh all decisions – not just financial – using it. Remember that everything has a cost, not just financial, and you need to know what you are potentially giving up when choosing one thing over another.

3. Memories Are Better Than Material Objects

I think this is a learned point. In my teen years, it was all about the object: status symbols. I wanted the name brand clothing and the cool sports car. Now that I am in my 30’s, all I care about is hanging out with my friends. Even if we sit around all night talking, it doesn’t matter. I enjoy their company and I have those stories and memories for the rest of life. And I wouldn’t trade any of that for designer jeans.

4. Watch Your “Lifestyle Leverage,” Especially Early In Your Career

This is important. Many people graduate college and stop living the college lifestyle. They buy a new car, new wardrobe, and rent the nicest apartment they can find. They leverage their future. If you are a soon to be graduate, keep living the college lifestyle. It’s OK to live with Mom & Dad for a year or two and drive around the old beater a couple more years. With the money you save, you can get a jump start on your retirement. Remember, the sooner you start, the more time can work its magic.

Action Step: Question purchases, all purchases. Do you really need it? Will it help to get you to where you want to be in 5 or 10 years? Advertisers are good at getting us to buy on emotion. Stop and question purchases to save money.

5. Having Goals is Incredibly Important

Goals are important. They keep you motivated and lead to more goals. I see setting a goal as challenging myself. I feel that I need to be challenged to grow and learn and never want to stop doing either. Growing makes me a better person.

Action Step: Learn to set goals for yourself. Don’t make the mistake of setting many goals at once. Take it slow. I like to break my long term goals into short term goals. Paying off $15,000 worth of debt sounds daunting. After a few months, you might give up. Leave your goal to pay off the debt, but set up a smaller goal: get my debt under $10,000. You’ll notice the progress more and will stay motivated throughout the entire process. Once you get your debt to $10,000 have another goal to get it to $5,000. If these increments are still too big for you to stay motivated, then make them even smaller. Find what works for you.

6. You Must Live In The Here And Now

This one is hard, but is important. I, for example, like to visualize my future. While this is good, I must remind myself to “stop and smell the roses”. Life is a beautiful thing. Don’t miss it by living in the past or future.

Action Step: What’s in the past can’t be changed and what lays ahead no one knows. It’s necessary to have goals as mentioned above. But it is equally important that you learn to enjoy today. Take advantage of the life you have and enjoy it!

7. It Helps To Be Incredibly Lucky

This is interesting, and is true. “Luck is where preparation meets opportunity.” If you prepare yourself for the opportunity, don’t be surprised when it arrives. I like to say that for me, everything works out in the end. That might come off sounding arrogant, but it really isn’t. It’s meant to say that no matter how bad the situation that life throws me is, I stay positive and push through. I prepare myself for what’s ahead and I am able to take advantage of it when it comes.

Put another way, you might see the declines in housing prices and think, “man, others are so lucky to be buying houses right now. I wish I could, but I’m in debt up to my eyes.” They are lucky, but are so because they prepared themselves for the opportunity. They, like you, didn’t know housing prices would tumble. But by staying out of debt, they prepared themselves to take advantage of the situation, whether it be with houses or stocks or something else.

Action Step: Believe in yourself. Believe that you too are lucky and prepare to take advantage of opportunities when they knock. No matter what happens, find the positives in life. Get out of debt and put yourself in the best shape you can.

Final Thoughts

So there is the blueprint for you to become wealthy. You need to make it a habit of keeping your expenses low and finding ways to increase your earnings. As you do these two things, reread the life lessons of the wealthy too and learn from them.

In fact, I encourage you to bookmark them and read them over and over again at various times. The reason is because when you are in different stages in life you will look at them from a different perspective. In other words, you will always be learning from them.

And this takes me back to my original point – to learn from those that are where you want to be. Seek out those that manage their money wisely and pick their brain. Learn from them and then use those tips and techniques in your life as you grow your wealth.

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I would generally agree as well – especially on the lifestyle leverage. That can be a huge issue, especially if you’re needing to pay off debt when you’re first on your own. That time should be focused on paying it off and starting to build up a solid nest egg and not being extravagant. I would also add that many are also looking for opportunities to grow their money and wealth. They may not always work out, but many do.John S @ Frugal Rules recently posted..Confessions of a Work from Home Dad

Hey, that’s pretty good. I agree with everything especially this one – It Helps To Be Incredibly Lucky. I feel I’m super lucky and it keeps me going through good and bad times. I know it will get better later. I guess that’s being an optimist too.
Cash rick, time poor — It depends on what you spend your time on. I don’t have a lot of time because I spend most of the day with my kid. That’s still good.midlifefinance recently posted..‘Foolproof’ Numbers: Can You Trust Them?

Very interesting! It’s really good to read a post about the lesson’s learnt from those who are rich. I’m sure many people can learn from this.Daisy Coleman recently posted..How to keep on top of your emails

When I think of the wealthy I don’t always see happiness. “I’ll be happy when I have …..” is their mentality. So memories being more important than material things resonates most with me.

Most of the McMansions in our area are empty most of the time. People are too busy working and earning more to enjoy what they already have. It’s a death spiral.Kevin H @ Growing Family Benefits recently posted..Why do Men Pay More for Life Insurance?

I love this list Jon! Right now, I’m really focused on the “time poor” equation. I have four children running here, there and everywhere and I want to be involved with as much as their lives as possible. There will always be time when they are gone to make money. They will be living in my house as kids only once. I can’t miss that.Brian @ Luke1428 recently posted..How Couples Can End the Money Fights

I completely agree with this list. As I grow older am realizing that in the grand scheme of things, time is the most precious thing you can spend and experiences and memories what you should be spending that time on. With time you can always make some more money, but you can’t buy back time to spend with your loved ones forexample. Striking a balance is certainly crucial.
And yes, Luck accounts for a lot in life!Simon @ Modest Money recently posted..How To Choose The Best Online Investment Platform

I think that’s pretty much my career motto. Jobs in the entertainment business are ridiculously difficult to get – if you have high expectations like, you know, a living wage and health insurance. When the tiniest opportunity comes along, you have to be prepared to wedge yourself in there and kick butt like they’ve never seen before.Mel @ brokeGIRLrich recently posted..Debt Profiles: Mel’s Story

Great stuff here Jon, agree with the points you make here & this is similar to what Tom Coorley and Rich Habits espouses in his book / blogs :)..

While sure cutting expenses are great though, for me definitely generating residual income is a life lesson you are sort of hinting at here but not sure it’s explicit.. What are you thoughts on this i.e. having multiple residual income (or call it passive I suppose if you’d like ha) streams

Great tips! Another resource for readers would be “Millionaires Next Door”. Its a personal finance classic, but really hits home about how Millionaires aren’t all that flashy or buy every expensive items they can buy.

Thanks for sharing those life lessons from very wealthy. What I can sense now is that they’re goal oriented and have a can-do attitude.Jayson @ Monster Piggy Bank recently posted..Have you got lost Superannuation

Great points from those that are already rich. I really think being rich isn’t how much stuff you have but being able to do what you want and not have to worry about money. Like treating a friend to dinner or going on a last minute vacation or whatever else you want. It’s up to you i would be rich if I could stay in a cabin reading all day on the lake but others need much much more

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